As Uber's stock craters amid billions in unanticipated losses, a hiring freeze on engineers

Substitute “know-nothingism” for “techno-utopianism” and you’ve got the guiding principles for the GOP…


No, no, it totally works! You just need to move the business to fully autonomous cars, which cuts out the driver’s share of the revenue. Sure, that won’t happen for a year or two. Or five. Or, um, ten. And, ok, granted, that means all the costs that are currently externalized - buying the cars, cleaning, maintaining, and replacing the cars - which are currently borne by the drivers will come back to the company itself, but… [runs numbers]… well, shit.


*Urge to learn how to hack autonomous vehicles rising*


Yeah it blows my mind that there are people out there who think Uber will somehow magically become profitable once they pivot from an app for operating unlicensed taxis to owning, operating & maintaining a huge fleet of robots.


And both of those point to the one major flaw in the math here, and how Uber has sold itself to the capital class other than whizz bang THE FUTURE! And its a fair bit of the thrust of the Bezzles article Cory links to.

Uber, lift and their ilk in transport startups (and honestly many other "sharing ecconomy companies), seem to think they can take advantage of economies of scale in the way that other sorts of businesses do. But many of the costs involved in running a car service are relatively fixed. Cars only get so cheap with fleet level purchases, and then only on special fleet models. Insurance can only get so cheap, because it still must cover the real world risks and costs. Maintenance costs are mostly fixed, real estate/space. Gas does not become cheaper if you are refueling 20,000 cars rather than 20. To impact these costs you can centralize them and bring them in house, but that escalates infrastructure and overhead heavily. You cant get a discount by aquiring chauffeur’s licenses and car registrations in bulk. And of course labor, the major thing with these companies, never gets cheaper the more people you employ.

Expenses in these sorts of transport company do not scale the way they do for other kinds of business. That’s why we don’t see large multi-national taxi firms and conglomerates.

Just dealing with those costs and passing them on to customers means you start from a baseline that’s not competitive with smaller companies that are more efficient at this model. And as you grow those prices will also grow so you basically grow yourself out of the market. No one is taking an Uber if it costs twice what a regular cab does.

So they build themselves on the basis of avoiding those costs. And they have done so by offloading them to drivers. And labor remains the big, non scalable thing. So to lower it, you need to exploit your workers or eliminate them. And you can’t eliminate them because less workers means fewer cars, which means less product to sell.

Basically they’re trying to take something that doesn’t scale well and force it to via jet packs and foisting costs off on anyone but themselves and their customers.

But there’s a much better, more established sensible way to avoid that problem. And its don’t sell car ride. Sell the logistics around it, its the only major thing they’ve developed apparatus for. Leave the difficult to scale part to the sorts of operations that are actually efficient there.

They won’t because they want to be able to take the bulk of any fares offered, that would seem to be the driving force in building taking this approach.


I’m envisioning that they externalize this, as well. They could start an MLM to handle it.


They have an app that allows unlicensed taxis to pick up passengers and handle payments. Somewhere along the way, they assumed that they owned all those drivers and their cars.

That’s like Facebook assuming that it owned all its users… wait…


Haha there’s always that. Though if the idea is I’d buy a car then set it in “Uber Mode” & it roams around picking up fares while I’m at work/asleep/whatever I’m not sure how I’d make sure it makes it way back to my space when it is time for me to use it myself OR how Uber ends up doing this rather than Ford (or whoever the manufacturer is). And geez if I’m at work 40 miles from my house and somebody’s puked in my backseat or my car has PC LOAD LETTER-ed into a river that’ll be a real downer.


Was that Josh Umbehr/Atlas MD?

I admit to a slight flaw in my character that compels me to periodically tune into right-wing radio to monitor the latest talking points, and one of those chowderheads (Michael Cohen’s other client) periodically raves about them. If it was Atlas, I’m curious to hear how their “Direct Primary Care” subscription model works in practice.

I do really wonder how much of a savings - if any - getting rid of drivers with autonomous cars (at some vague point in the increasingly distant future) would make, because of the driver subsidies. If Uber gets rid of drivers, they now have to buy and replace the cars themselves, a significant cost. Then they need to clean and maintain the cars. Economies of scale that work for them, but now they need to actually hire a lot of people - I don’t know how they turn those workers into private contractors. Then, presumably, they also need physical facilities in which to clean and repair the cars - unless they just contract with local garages, though I don’t see cleaners working from home, with a line of cars pulling up in front of their house (though that’s another externalized cost)…

It seems like getting rid of their single biggest expense might actually cost them more, ultimately.

Well, they’ve got to exist, first. Much as it pains me, it really looks like that’s not going to happen any time soon - at least, not as street cars.

Hell, part of the problem is that they’re not even “operating” unlicensed taxis, the app just calls them. They’ve externalized most of the operation costs. Which increases, relatively, the cost of running a robot fleet.

Yep, with autonomous cars, they’d have to increase their direct labor costs, as they’d lose the “independent contractors” who are currently doing some of that work (maintaining the fleet) while also subsidizing it. You might be able to get drivers to pretend to be independent contractors, but it doesn’t work so well for cleaning and mechanics.

Given how much they’re spending, apparently, on that part, I don’t see how that’s a viable business either, unless they can slash costs there. But I’ve always imagined, that if they had a future, it would be providing those logistics to a company like GM that owned and operated the fleet of autonomous cars. But it doesn’t seem like that future will come quickly enough to save them (even if GM doesn’t decide it’s cheaper to do the software side itself).

If people owned their own autonomous vehicles, I suppose. But the nature of autonomous vehicles is that people are less likely to own cars at all. GM has talked about how autonomous cars would become cars as a service rather than a product - which means they would be the competitor, with a big advantage on putting together a fleet of cars at cost.

But yeah, an MLM is the only conceivable way they could make that work… for a while, anyways, until it all came crashing down.


Reminds me of webvan.

If we had any kind of problem with our order, they’d throw $25 credits at us.

If we didn’t use them for a while, have another $25 credit.

It did suck when I had to go back to Safeway and the one Safeway delivery we tried was an unmitigated disaster (they gave our food to someone else, who accepted it, started eating it, and Safeway went back to get it).

I sense another dotcom bubble about to burst (app bubble?)

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Apparently their major cost is still labor and the whole developing driverless cars thing. The processing/logistics end of it does typically scale quite well, even in tech. Server space does get cheaper as you book more, and bringing a data center in house reduces overhead more than attempting to maintain a sizable word wide fleet of vehicles.

Look at air B&B and their ilk. They stay out of actually maintaining, controlling and renting properties. Just providing the infrastructure to do so. Still have the same as always tech regulatory avoidance. But they’re essentially taking a cut for making servicing some one else’s business. What they sell is a platform that make other businesses easier to pull off. And they don’t burn money like this.

Friend of mine worked for a startup that focused on payroll and benefit services for small businesses and freelancers. App and web based tools that make it easier to handle withholding and what have when you draw pay from your business, issue w2s etc like your supposed to to minimize tax burden from work for hire and independent contract work. And they’ve added a bunch of financial services functions, simplified retirement contributions, tax support etc. For smaller operations its a lot cheaper than big payroll companies like PayChex and ADP and the tools are much more targeted to be useful to you.

They’re the only start up I’ve ever seen turn a profit as soon as they launched.

And there are perfectly healthy companies offering just this service model for ride hail as an alternative to Uber and Lyft. NYC’s yellow cabs have been using them to compete, and several cities have contracted such firms for municipal alternatives. None of them burn money like Uber, many are perfectly profitable. None of them have gotten anywhere near as large, or attracted as much investment. But they’re less flashing sounding and they’re heading up against an anti-competative, regulation skirting behemoth. In all likelihood when Uber and Lyft collapse one of those will subsume the market they leave behind.


An the “other businesses” that they are apeing without understanding are things like software, games, music movies etc, where the marginal cost of production is de minimus
and profits are protected by IP laws. There’s a reason that these startups are often based in areas where those industries, rather than ones that produce goods that have actuall inputs in labor and material that do not disappear with volume.Pretending that they are just an app provider rather than a giant taxi company isn’t JUST about avoiding labor laws, it is also about convincing their next round of investors that their business model scales.



Yeah, I was assuming their costs were all people in offices. My presumption was they were doing that bit quite inefficiently (beyond the research costs), though what the unnecessary costs are, I have no idea. I was leaning towards management and marketing, but obviously the research is eating up a lot of money, with no payoff in sight.

I was wondering about that - I assumed it was a workable business model, just not for Uber, as things stood.

I’m not saying if we bring underpants into the Uber business model, it’ll make more sense. I’m just saying it won’t make any less sense.


As well as things like manufacturing, and restaurants. Where materials and supply chains costs are large. Or or services and support work as in media (think special effects in blockbuster movies, its usually multiple specialized sub contractors).

That sort of stuff can often be scaled through vertical integration, and volume purchases. But that’s not really happening in a transport company. You can get in on vertical integration and bulk buys of the few materials involved, but that doesn’t exactly scale as well. Fuel all vehicles at a central location, hire your own mechanics and have them do their thing at a central location, purchase vehicles in bulk. Even commission specific designs to meet your needs and…

Which sounds and awful lot like public transit.

Apparently the bulk of those people are drivers. If they some how had more backend and support staff than drivers. It’d be even more fruitless because they wouldn’t have enough rides to sell to cover all those people.

What it boils down to is they’re losing money because they charge vastly for a trip less than it costs to make that ride happen. Even with as many of the costs as possible offloaded. That’s what people mean when they say subsidizing every ride.

I doubt they’d be able to make the shift. Anyone blinkered enough to build the company they have would never recognize the option till it was well to late.


Besides the driver-less car money-hole, what are they burning money on?

  • They don’t own the cars.
  • They don’t pay for the gas.
  • They don’t pay the drivers a salary.
  • They don’t operate driver training academies.
  • They don’t have a large team of inspectors.
  • Do they even advertise?

Might I suggest a bicycle, if you can ride one? At least in cities, it’s usually as fast as an Uber and much more affordable and sustainable. And most of the difficulty bicycling in cities lately is boneheaded drivers with Uber or Lyft stickers staring at their phones and ignoring everything else.

Of course for those who can’t or don’t want to ride a bike we need a good transit system, and Uber has sadly been trying to convince local governments to just subsidize Uber rides instead of investing in real, sustainable transit…


Autonomous streetcars, though, seem pretty likely. San Francisco’s already are automated in the subway; above ground in mixed traffic is tricky but still much easier than for a car which can steer rather than being guided by tracks.

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“We’ll keep subsidising cheap rides until every public-transport system in the world is forced to close; then we’ll absorb all their business and recoup the losses by gouging commuters.”

I think this has been covered in previous BB posts.